Regional environment, political connections and the auditor selection — Empirical evidence from Chinese listed companies

Based on the data of Chinese listed private enterprises from 2005 to 2008, we study the relationship between environmental, political connections and the audit requirements. The results showed that, in the areas of poor market environment, companies tend to choose low-quality auditors and are more motivated to seek political connections. We also find that politically connected firms prefer low-quality auditors, and they often correspond to a greater degree of earnings management. The results of this study not only enrich the literature of political association, but also have some inspiration for the legal construction in China.